THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CANDY CROWLEY, HOST: In a town awash in rhetoric, Defense Secretary Robert Gates has been a standout.

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QUESTION: Do you believe that we are currently winning in Iraq?

GATES: No, sir.

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CROWLEY: The only defense secretary to serve two presidents from different parties, Robert Gates was always direct, heading for the exit, he has taken direct to a new art form.

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QUESTION: How long do we support governments to lie to us?

GATES: Most governments lie to each other. That's the way business gets done.

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CROWLEY: Plenty to say and no reason not to say it.

Today, outgoing Defense Secretary Robert Gates.

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GATES: I just want people to face up to these realities.

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CROWLEY: Then gearing up for 2012 with Obama's senior campaign adviser David Axelrod.

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AXELROD: The values that drove him in the first -- to get into politics are the values that drive him today.

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CROWLEY: I am Candy Crowley, and this is State of the Union. We begin at the end of a chapter about a Eagle Scout from Wichita whose dad sold auto parts. Robert Gates has served eight U.S. presidents at the CIA, the National Security Council, and five years as defense secretary across two wars.

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QUESTION: Secretary Gates, I look forward to you coming home to our home state at some point. I know you must be looking forward to that.

GATES: 15 days.

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CROWLEY: 11 days now, and counting. I sat down with Defense Secretary Gates yesterday afternoon.

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CROWLEY: Secretary Gates, thank you so much for joining us. Let me get to some news here over the weekend. And that is President Karzai from Afghanistan says that the U.S. is talking directly to the Taliban in peace talks. Is that so?

GATES: Well, I think there has been outreach on the part of a number of countries, including the United States. I would say that these contacts are very preliminary at this point.

CROWLEY: At what level is it?

GATES: Well, it's being carried out by the State Department.

CROWLEY: So it's at a diplomatic level, not at the level of secretary of state?

GATES: No.

CROWLEY: And when you say...

GATES: And as I say, other countries are involved as well.

CROWLEY: And when you say preliminary, how long has it been going on?

GATES: Well, I'm not sure. A few weeks, maybe.

CROWLEY: And is the nature of it how can we get peace here?

GATES: Well, I think first question we have is who represents Mullah Omar? Who really represents the Taliban? We don't want to end up having a conversation at some point with somebody who's basically a freelancer.

And I mean, my own view is that real reconciliation talks are not likely to be able to make a substantive headway until at least this winter. I think that the Taliban have to feel themselves under military pressure and begin to believe they can't win before they are willing to have a serious conversation.

We have all said all along that a political outcome is the way most of the wars end. The question is when and if they are ready to talk seriously about meeting the red lines that President Karzai and that the coalition have laid down, including totally disavowing Al Qaida.

CROWLEY: And two questions come out of that. And the first here, is there any part of you knowing what the Taliban has done, which is basically protect and help the folks who made an attack on the U.S. on 9/11, any part of you that is uneasy with this sort of talk?

GATES: Well, I think first of all we've just killed the guy that was responsible for attacking us on September 11th. And we have taken out a lot of other Al Qaida as well over the years.

Look, we ended up talking to people in Anbar Province in Iraq who were directly killing -- had directly been involved in killing our troops. That's the way wars end.

CROWLEY: And the second question coming out of that is that you seem to, again, be making the case that June is not really the time for a major drawdown or even a significant drawdown as the president said he wanted of U.S. combat forces in Afghanistan, if you say, as you do, the Taliban needs to feel pressure this winter?

GATES: Well, look, the president has added something like 65,000 troops to Afghanistan since he took office. Whatever decision he makes, he will have a significant number of troops remaining in Afghanistan. He announced in December of 2009 with all of our support that the drawdowns would begin in July of 2011, and that the pace and the scope would be based on the conditions on the ground.

Well, one of the conditions on the ground is we have made a lot of progress over the last 15 months. We have basically thrown the Taliban out of their home turf of Kandahar and Helmand Provinces. So I think we will present the president with options and different levels of risks associated with the options and he will decide.

CROWLEY: But you have made no secret of the fact that you think there should not be any kind of major drawdown at this point, during the critical time that you want to protect the advances that you talked about, and you are now talking about the Taliban needing to feel the pressure of U.S. forces. And so am I right to say that you want still a modest drawdown?

GATES: Well, what I also have said is that the drawdown must be politically credible here at home. So I think there is a lot of room for maneuver in that framework.

CROWLEY: There certainly is.

You know Senator Carl Levin, who has suggested 15,000 troops by the end of the year. Is that doable as far as you are concerned?

GATES: We can do anything that the president tells us to do. The question is whether it's wise.

CROWLEY: So let me ask you that more correctly, is it wise?

GATES: I am not going to get into any advice that I may or may not have given the president.

CROWLEY: Well, in terms of -- yes, and I totally understand those have to be private conversations. But publicly, Senator Levin has said, hey, I think you can get 15,000 troops, so I'm just trying to see if you think that that would be a wise decision to pull out 15,000 troops by the end of the year, combat or otherwise?

GATES: We're all aware of what Senator Levin has called for. But the president also, unlike Senator Levin, has the responsibility.

CROWLEY: I want to play you something, and I'm sure you heard some of this, this was from hearings -- questions at hearings on Capitol Hill. Take a listen to this.

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UNIDENTIFIED MALE: What is the mission and what is the -- therefore, what is the goal?

UNIDENTIFIED MALE: How much can we achieve? And how much of that actually benefits our strategic objectives, and that's what I have been struggling with more than a year now.

UNIDENTIFIED FEMALE: Tell me how it ends. I just don't so how it ends.

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CROWLEY: Let me reformulate that last question a little bit. How do you want this to end? What do you see as a doable end to U.S. combat presence in Afghanistan?

GATES: Frankly, I don't see what is so complicated about it. How this ends is essentially the same way it ended in Iraq, with us playing a key role for some period of time, building up the local security forces, in one case Iraq, and in this case Afghanistan, and degrading the capability of the Taliban to the point where the Afghan forces can take care of them, and then transitioning the responsibility for security to the Afghans.

That transition has already begun. A quarter of the Afghan people, including Kabul, live under Afghan security leadership. And what you will see between now and 2014 is the transition of the rest of the country over a period of time.

As the Afghan forces get better, we can pull back into training and partnering role and more into counterterrorism. And so I think this transition to Afghan leadership, so that they can keep control of their own country, so that Al Qaida can no longer find a safe haven in Afghanistan, and so the Taliban cannot forcibly overthrow the government of Afghanistan.

That doesn't seem that hard to me for people to understand.

CROWLEY: I think maybe just over -- it just seems that this has been a very long war. And as you know by looking at the polling, by listening to these folks up on Capitol Hill, which I know you often have to be up there, that the political will is not there anymore?

And I understand that you understand that people are weary of war, as you are. GATES: I know the American people are tired of war. But, look, the reality is the United States had a very limited commitment in Afghanistan until well into 2008. And we did not have the right strategy and the right resources for this conflict and a lot of resources, those needed to do the job, until the late summer of 2010.

The president made this decision for the second surge in December of 2009. It took us some months to get the additional surge in. So I understand everybody is war weary, but the reality is we won the first Afghan war in 2001 and 2002. We were diverted by Iraq, and we basically neglected Afghanistan for several years.

When I took office at the end of December 2006, 194 Americans had been killed in five years of warfare. That is the level of conflict that we were engaged in.

GATES: So I understand we have been at war for 10 years, but we have not been at war full scale in Afghanistan, except since last summer.

CROWLEY: Secretary Gates, I'm going to ask you to stick with me, we are going to take a quick break. When we come back, more on Afghanistan and other trouble spots around the world.

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CROWLEY: We are back with Robert Gates, outgoing Pentagon chief. Thank you so much for being with us here today.

I've watched you over the past couple of weeks. You have made a lot of appearances. You have said good-bye to the troops in Afghanistan. And there has been some emotional farewells to the troops, which I think are understandable. There's an admission of the toll it has taken on you, watching and knowing that you are responsible -- partly responsible for these young men and women going overseas and into war.

And then there was this which caught a lot of attention when you spoke at West Point at the end of the February.

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GATES: In my opinion, any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should have his head examined, as General MacArthur so delicately put it.

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CROWLEY: Now the totality of the speech was about the Army needing to readjust what it does, how it trains itself, that kind of thing, but I can't help but wonder whether you are leaving with regrets.

As I watch you, I think you are sorry about some things and I can't figure out what it is. Were these the right wars?

GATES: Well, I have said all along, first of all, only time and history can answer that question. What I do know, and what I do have confidence in is that once there, failure is a huge challenge for the United States. And failure will have costs of its own that will linger with us for a long time, as was the case in Vietnam. So my objective in both of these wars has been to end them on terms that enhance the United States' security, that uphold America's prestige in the world and our reputation, and advance our interests. And if we can accomplish that, then bringing them to a close as quickly as possible, I think, is the right thing to do.

CROWLEY: And when you say this, I know that history judges this, but I can't help but get the feeling from you that you have judged at least in the near term about these wars, and what do you feel?

GATES: Well, first of all, we had no choice in Iraq -- in Afghanistan, I should say. We were attacked out of Afghanistan. And, in a way, if I had it all to do over again I probably would have used different wording at West Point, because if the United States is directly threatened, I will be the first in line to say we should use military force and that we should do so with all the power that we have available to us.

It's wars of choice that I have become more cautious about, and being very careful about electing to send military troops in -- or send troops in harm's way wherever they may be, if it's a matter of choice, as opposed to a direct threat to the United States. So that was really what I was trying to express, and frankly didn't do so very well.

CROWLEY: Well, it got a lot of play, as we know.

GATES: It sure did.

CROWLEY: So I'm just going to extrapolate here, and that is that you have -- prior to it, if you had to go back, and you were not here when the Iraq War started, but that you question whether we should have gone to war in Iraq?

GATES: Well, what I've said is that the war in Iraq will always be clouded by how it began, which was a wrong premise, that there were in fact no weapons of nuclear -- weapons of mass destruction.

CROWLEY: Using your measurement and your lessons that you take from recent history, how does Libya fit into this? GATES: Well, I would say that the broader point that I try to remind people of is the inherent unpredictability of war. Churchill said something to the effect that once the guns start the fire, the statesman loses control, because no one can predict what will happen.

By the same token, I think the president's decision that we would go in big at the beginning, and establish the no-fly zone, in accordance with the U.N. Security Council resolution, and then recede into a support role because of all the other commitments we have in Iraq, Afghanistan, 24,000 people in humanitarian work in Japan because of the earthquake and so on, that was his understanding with the other leaders from the very beginning of this thing, that that's the way this would play out.

So he stuck to that. He made clear there would not be U.S. ground troops in Libya, and he stuck to that. So I think that he set a way in which the United States would participate at the beginning, and then once the no-fly zone was established, and he stuck to that. And I think that has been very disciplined.

CROWLEY: And but in terms of just the action itself, with the U.S. being involved with other NATO members in essentially -- these have been aerial assaults, no ground troops from anyone, really, I think there are some trainers and stuff in Misrata, but nonetheless, this does not fit your category of direct threat from overseas? Libya was not a direct threat?

GATES: No, no, but let's look at it this way. It was considered a vital interest. What was going on in Libya was considered a vital interest by some of our closest allies. Those are the same allies that have come to our support and assistance in Afghanistan. And so it seems to me the kind of limited measured role that the president decided on in support of our allies, who did consider it a vital interest, is a legitimate way to look at this problem.

CROWLEY: And yet your feelings about NATO you've made pretty clear in some recent speeches.

CROWLEY: You don't think they've paid their fair share in terms of NATO either in dollar terms or in troop terms. They tend to take positions in Afghanistan and elsewhere where they are not in the kind of danger that U.S. troops are in.

So our plan was to go in Libya and then let NATO, this group that you think doesn't pay its fair share in any way, shape or form, take the lead?

GATES: Well, I think what we have seen -- and they have taken the lead and they have performed. I mean, the interesting thing is some of the smaller air forces, like the Danes and the Norwegians have contributed maybe 12 percent of the aircraft but hit 30 percent of the targets. So some of these guys are punching above their weight.

The British and the French obviously have significant forces engaged. I think that the worry that they all have, and what I was reflecting in my speech in Brussels, was that because of the lack of investment in defense over decades that their forces are beginning to be stretched by a limited engagement against, basically, kind of a third rate dictator.

CROWLEY: Sure. And some of them are already setting end dates and everything.

How long is the U.S. going to be in Libya? How long should we be backing up -- we're not in Libya.

GATES: First of all, I think that the allies are prepared to sustain this. We are seeing the Gadhafi government weaken. This is not, I think -- I think this is going to end OK. I think Gadhafi will eventually fall. My own bet is he will not step down voluntarily, but somebody will make that decision for him, either his military or his family.

CROWLEY: Somebody will kill him?

GATES: Possibly.

And -- but I think that the allies will be able to sustain this until that happens. And we will support them.

CROWLEY: Once more, Mr. Secretary, I wanted to ask you to stick with me.

When we come back, we're going to talk about the future of U.S. forces with the outgoing secretary of the Pentagon.

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CROWLEY: We're back with Secretary of Defense Robert Gates.

A couple wrap-up questions. June 6th was the deadliest day for U.S. troops in Iraq in two years. These are advisers, and these are not combat troops. What are your fears vis-a-vis Iraq, especially when it comes to Iran and its influence when we leave Iraq at the end of the year?

GATES: Well, I think that actually is one of the reasons why the Iraqis and we are talking about some kind of a residual American presence in terms of the helping them with beyond December of 2011.

CROWLEY: What does that mean, residual?

GATES: A small number of troops that would stay behind to train, to participate in counterterrorism, to help them with intelligence and so on.

CROWLEY: 10,000?

GATES: The number will depend on what the mission is, and the mission is what we're discussing with them and what they are discussing among themselves.

I am worried about Iranian influence. The truth is most of our kids who have been killed recently have been killed by extremist Shia groups, not by Al Qaida in Iraq but by extremist Shia groups and they are clearly getting some fairly sophisticated and powerful weapons from Iran.

And so I do worry about that. And frankly I think based on what I have seen in the last few days, I think Prime Minister Maliki is beginning to get worried as well and take serious these extremist Shia groups.

CROWLEY: Let me ask you about Al Qaida. What does it say to you that post bin Laden, when we all thought oh, they're going to make an attack to retaliate against U.S. troops killing Osama bin Laden. It hasn't happened. As far as I can tell, there's been no real lift in the terror warnings. Are they too weak to launch a strike against the U.S.?

GATES: Well, a couple of things. First of all, they have been significantly weakened. There's no two ways about it. Killing bin Laden, he's not the first leader we have killed in Al Qaida. We've taken a real toll on them over the last -- particularly the last two years. But the last several. And so there have been real successes there.

Second, most of their operations that we see do take some time to prepare, and get things ready. So we worry about Al Qaida central there on the Pakistani/Afghan border. But we also worry about Al Qaida in the Arabian Peninsula, in Yemen, in North Africa, in the Maghreb.

And so this is a threat that in some ways has metastasized. And the question is, whether Zawahiri, the new leader taking bin Laden's place, can hold these groups together in some kind of a cohesive movement. Or whether it begins to splinter and they become essentially regional terrorist groups that are more focused on regional targets.

And we just don't know that yet.

CROWLEY: And let me turn to budget cuts, because as you know that's all the rage here in Washington these days. And something you said about the size of the military.

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GATES: We need to be honest with the president, with the Congress, with the American people, indeed ourselves about what those consequences are. That a smaller military, no matter how superb, will be able to go fewer places and be able to do fewer things.

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CROWLEY: So what are you warning against? Do you think it would be a good thing to have a smaller military that can go to smaller places? Clearly not?

GATES: Clearly not. But what I want to avoid, the worst possible outcome of this budget process, is what happened in 1970s and to a lesser extent in the 1990s, and that's the across the board cuts where everything becomes mediocre, and you don't cut (ph) infrastructure.

CROWLEY: What should not be cut in the military budget?

GATES: Well, the two things that I have told the chiefs to fence, basically not touch, are all of our family programs and our training. The training is where we often take the hit first when it comes to budget cutting.

But we have to make investments in the new tanker. We have to make investments in a fifth generation fighter. The Chinese and the Russians are both developing such fighters. We have to make investments in our surface ships.

There are certain areas were we just have to make -- our surface ships, the number of our surface ships in our Navy will be at the smallest number since 1916. And if you cut the surface ships, then the ability to do things like humanitarian assistance in Japan will be affected by that.

And I just want people to face up to these realities and face the fact that if they have to make hard choices rather than the politically expedient approach of saying, well, let's just cut everything by a certain percentage. CROWLEY: And if someone were sitting on the other side of this television screen saying why does the United States have to stay a super power? Why do we have to go some of these places? I am OK with cuts in some of the things you are talking about. Why should the U.S. stay a super power?

GATES: Well, there are clearly going to be some cuts in things that I care about. But the United States has global interests. We've had global interests for a century and a half. The United States has been a global power since late in the 19th century.

We have interests. We have allies. We have partners. And find there's a bad -- we have a bad history. When we turn inward, we end up in a really big war.

CROWLEY: Mr. Secretary, a very emotional issue for some family members of services people who kill themselves while on duty. And that is the president traditionally over many years has not written condolence letters to families who lose a family member in a service who has committed suicide. Should that policy be changed?

GATES: I think we have looked at it very closely. And I have discussed it personally with the president. I have not done so either, so it's not just the president's policy. And so I think the services, and the defense secretary and the White House all need to revisit this issue.

CROWLEY: Revisit that, because in fact, you all are trying to make it a more open military to psychiatric services, people who need emotional help. And this stands in opposition to that, does it not?

And finally, is this the last time you are going to retire from public service?

GATES: Yes, for sure.

CROWLEY: That's it for you.

It's been nice having you in Washington. Have a good retirement.

GATES: Thank you.

CROWLEY: Thank you.

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CROWLEY: CNN's debate this week featured seven Republican rivals with different ideas about how to reach one mutual goal.

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NEWT GINGRICH, PRESIDENTIAL CANDIDATE: We need a new president to end the Obama depression.

UNIDENTIFIED MALE: This president has failed.

UNIDENTIFIED MALE: The program that President Obama has put forward haven't really worked.

MICHELLE BACHMANN, PRESIDENTIAL CANDIDATE: President Obama is a one-term president.

(END VIDEO CLIP)

CROWLEY: But in the end the re-election of President Obama will have less to have to do with who they elect to run against him than cold hard facts, a 9.1 percent unemployment rate and a restive public.

Asked if they are satisfied with the direction the country is headed, 78% of the Americans said no. It is rough economic terrain that could change the electoral landscape. Strategists on both sides see these five states, ones the president captured in 2008, as the most vulnerable for a republican takeover in 2012. Together they account for 79 electoral votes.

I asked one top Obama campaign official this week what he worries about most. His reply? The economy.

Next up, the president's senior campaign strategist David Axelrod with his take on the Republican rivals.

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CROWLEY: This week I caught up with former senior White House adviser, David Axelrod who returned home to his business in Chicago earlier this year. He has, he says, a client list of one -- the president of the United States.

Axelrod doesn't work out of re-election headquarters, he uses the comfortable political consulting office he has had even before he worked on the Obama campaigns. Here, he hands what used to be on his White House office wall, a picture, painted by his daughter of the White House and in its reflect the Chicago skyline.

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CROWLEY: You are back in Chicago.

AXELROD: I am, indeed.

CROWLEY: Helping to steer the re-election ship.

AXELROD: Yes.

CROWLEY: Something that the president said this week struck me. He was down in Miami talking to donors. And he said it's not as cool to be an Obama supporter as it was in 2008 with the posters and all of that stuff.

I think he's right. I think it's not as cool to be an Obama supporter now. How do you get cool back into this? AXELROD: Well let me say first of all, I find that it's cool to be an Obama supporter having sat with him for two years in the White House and watching him work through some very difficult things with a lot of intelligence and grace and equilibrium. I have great admiration for him.

But there's no doubt that when you are the incumbent, it's a little bit different.

I do think that ultimately what people -- the people who are participating in the campaign in 2008 were not involved in some cult of personality, it wasn't just about Barack Obama, it was about the country. And they care deeply about the country. And I think when this campaign gets engaged -- fully engaged and the choices become clear, you are going to see a great deal of activity out there on his behalf.

I think that it may not be the same, but I think the level of energy will be very high.

CROWLEY: And when is fully engaged? I mean, how do you lay that out for me?

AXELROD: Well, I mean, -- look, he has a day job, Candy. Let's stipulate that you and I are junkies, right. We get paid to do it and we would be fascinated by it if we did not. But most Americans are living their lives trying to deal with what is in front of them. And they just had an election. And they're not hankering for the next one to begin.

They want the president of the United States to deal with the challenges facing this country.

AXELROD: And that's what he's going to do from now until next spring and summer, when the candidates are chosen and we have a great national debate.

CROWLEY: I know -- I know you look at the polls, and as much as you look at the polls is about as much as you hate to have me talk about them, but let me ask you a couple things.

In the latest poll that we saw, about 42 percent of independents supported a re-elect for President Obama. That's compared to the 52 percent you got in the win.

When you ask staunch liberals, do you approve of the president, 64 percent approved of the president's performance; 89 percent is what you had vote for him in the last election. So, first, let's take it from your base. Why is your base unhappy?

AXELROD: First of all, Candy, let me say, if we sat together at this point before the last election, the poll numbers that you quoted me would be about as relevant as the Farmers' Almanac.

CROWLEY: It's true. It's a snapshot in time.

AXELROD: And that's true here as well. Again, Let me emphasize that, when we get to the election, it's going to be a choice between two candidates. I have no doubt that our base is going to be very, very solid. And in fact, the polling that I've seen is a little bit contrary to that. I think our base is going to be very, very solid because they'll understand what the choices are and the direction which he wants to lead and the direction in which the Republican candidate will want to lead.

And I think one of the things that's going to inform that campaign is whether that Republican candidate is going to yield to some of the forces within his own party or her own party that is driving their -- their party further to the right.

That will, I think, make independent voters step back. Because what independent voters want is for us to work together, both parties, to solve the problems facing the country. They don't want harsh partisanship. They don't want unremitting ideology. And the president is a pragmatic leader who is willing to work with whomever is willing to work with him to try and solve the problems of this country.

CROWLEY: But it's to your benefit to portray whoever comes out of the Republican process as a right-wing conservative, sort of...

(CROSSTALK)

AXELROD: No, I'm not -- I'm not interested in characterizing the candidate as a right-wing conservative. I am interested in looking at their views and whether those views are consistent held.

One of the things that people are going to look at is not just the positions that the candidates take, not just their records, but also the character of their -- of their leadership and politics.

And part of that character is do you have the fortitude to stick with your positions or do you shift according to the political moment?

CROWLEY: That sounds like a Romney argument.

AXELROD: Well, I mean, it could fit any number of people. It's not unusual in politics for people who are ambitious to change their points of view on fundamental things to try and win an election.

But that's not what people want in the president of the United States.

CROWLEY: But the -- the president did, as a candidate, over time, change his opinion. I mean, he was hit for that, too. There had to be...

(CROSSTALK)

AXELROD: Nobody -- nobody in public life does or should never change an opinion. But the question is on the fundamental things, basic things. Are you going to be consistent so that, when people vote for you, they have some sense of where you'll be the next day.

My experience with Barack Obama is he's one of the most consistent people that I have ever met. The values that drove him in the first to get into politics are the values that drive him today. And it's a fundamental identification with middle-class people and people who are struggling to become middle class, and to push for the kind of opportunities that have characterized our country in the past and we want to characterize our country in the future.

CROWLEY: David, stick with me a minute. We're going to take a quick break.

AXELROD: OK.

CROWLEY: And when we come back, we want to talk issues and size up the competition.

David, can the president win with a 9 percent unemployment rate? AXELROD: Well, first of all, I don't think the unemployment rate will be at 9 percent, but I don't -- I don't -- I don't think there's a magic...

(CROSSTALK)

CROWLEY: What do you think it will be?

AXELROD: I am not an economist. I believe we'll make improvement, just as we've made -- you know, we were at 10.2. It's down to 9. I think that it will go down, but I don't think that's the fundamental issue. The fundamental issue is how do people feel? Do they feel like we're making progress? Do they feel like we're moving in the right direction? And do they feel like the person on the other side of the ballot would hold out greater hope?

And I'm very confident that -- that we will be in the right place.

CROWLEY: David, if you look at right track, wrong track, which I know a lot of -- a lot of pollsters put stake in, overwhelmingly people think the country is on the wrong track. So isn't that what you're talking about? You've got to have people feel like things are getting better, and they don't.

AXELROD: Candy, here -- here's what -- here's what I think. People understand that the problems we're facing took years to create and years to manifest themselves, and it's going to take longer than anybody would like to solve them.

But they want to know that the approach that's being taken is the right approach, and it has at its core their economic security and -- and best interests. And the president has a balanced plan, a plan that has the middle class at its core and that has broad growth as a goal.

CROWLEY: So why don't they feel that way now?

What I'm saying is he has been in office now, do the math, more than two years, and people feel that the country's on the wrong track. So what changes between now and next November?

AXELROD: Because we've been through -- we have been through a horrific recession that followed a lost decade...

CROWLEY: Can you run blaming George Bush for the economy?

AXELROD: I don't think anybody cares about pointing fingers of blame.

CROWLEY: Well, you were talking about, well, these have been -- this was a decade in the making...

(CROSSTALK)

CROWLEY: ... so that, kind of, blames George Bush. AXELROD: No, no, that's just a fact of what -- that is a fact of what's happened in the life of our economy. I don't think this is about the past. It's about the future.

It is only relevant to talk about the past in evaluating the approach that people would take moving forward.

CROWLEY: I know as part of your job, we talked about this, is to watch debates. We had a big debate in New Hampshire this week. Size up the competition for me.

AXELROD: Well, look, I think it's early to size up the competition. There was a -- there seemed to be a unanimity of antipathy towards the president. I'll assert that. I didn't hear a lot of ideas. You know, Mayor Daley -- old Mayor Daley, first Mayor Daley once said we have to rise to higher and higher platitudes. And that -- I was reminded of that as I watched the Republican debate, because I heard a lot of kind of pat -- partisan platitudes.

But ultimately people are going to ask for answers. And they're going to ask hard questions. If you're Governor Romney and you say I'm going to turn this economy around, I've got the answers. You don't offer them. Then people have a right to say why is it that your state was 47th in the country in job creation when you were governor?

If you're Governor Pawlenty and you say we've got to clean up the fiscal mess, people have a right to ask why did you leave your state with a $6.2 billion deficit?

That's what campaigns are about. And so, one thing about running for president -- we ran a very long campaign, I know a lot about this, is whoever you are, people will know who you are by the end of that campaign.

And they're very valuable in that regard.

CROWLEY: Did anybody look particularly strong to you?

AXELROD: Well, you know, I don't know. I'll leave it to the pundits to grade that. I kind of agree with the conventional wisdom. I think Congresswoman Bachmann, who was relatively unknown, probably did herself some good there. I thought Governor Romney for what he did, did fine.

But we were through 28 or something of these things in our Democratic race. So I know this is very early, and I think it's the later debates that become more revealing.

And of course we've got some candidates who weren't there who are about to join the race. So that will add to the fight.

CROWLEY: One of them, Jon Huntsman, is getting in next week. Size him up for me? AXELROD: Well, I know him because he was President Obama's ambassador to China. I got to meet him when we were in Shanghai. I think he's a very bright, fluent person.

It was a little surprising to me because when we were in Shanghai we got a chance to talk. And he was very effusive, this was in the fall of 2009, about what the president was doing. He was encouraging on health care, he was encouraging on a whole range of issues. He was a little quizzical about what he was going on in his own party. And you got the strong sense that he was going to wait until 2016 for the storm to blow over.

And obviously circumstances change.

So I was surprised when he emerged as a candidate. But certainly I take him seriously. CROWLEY: You know, it's funny because I did a -- I interviewed him for last Sunday's show, and he said -- I asked him if he thought, as does Mitt Romney, that President Obama has had a failed presidency. And he said yes, he did, particularly on the economy.

AXELROD: Well, that is in conflict with what he communicated to us in 2009. And if he had suggestions on the economy, he had an excellent opportunity to suggest them then when we were all together in China.

I think what has changed is not his view of the economy, but his view of his own chances to perhaps win the nomination.

I understand that's politics. He's a politician. And he sees an opportunity. But it is -- it's a stark contrast to what he said when he wasn't on your program.

CROWLEY: Sounds like you're a little ticked off at him.

AXELROD: No. Listen, I've been around, as George Bush used to say, this isn't my first rodeo. So, you know, I think that anybody who wants to get in the pool should jump in the pool.

And I believe in the process. I believe you get tested in this process, your character gets tested as well as your ability to read a script or a speech, and so he and all the candidates will be tested.

And ultimately I'm very confident about the outcome.

CROWLEY: David Axelrod, senior adviser for the president, thank you very much for joining us. Appreciate it.

AXELROD: Good to see you, Candy.

(END VIDEOTAPE)

CROWLEY: Up next, a check of today's top stories followed by "Fareed Zakaria GPS."

(COMMERCIAL BREAK)

CROWLEY: Time for a check of today's top stories. The Libyan government says a NATO air strike hit a residential neighborhood in Tripoli today killing nine civilians. NATO says it's investigating those allegations.

The incident occurred a day after NATO acknowledged its aircraft had mistakenly struck Libyan opposition vehicles in an eastern oil city of Al Brega.

The Taliban is claiming responsibility for a suicide car bomb that target add NATO convoy in northern Afghanistan today. At least three people were killed and 11 others wounded.

Earlier on this program, Defense Secretary Robert Gates confirmed that the U.S. is engaged in preliminary peace talks with the Taliban. Greek Prime Minister George Papandreou pushed his parliament today for a vote of confidence in the new cabinet. The prime minister is trying to push through an economic reform package of tax hikes and spending cuts to avoid what he calls a catastrophic debt default.

The National Weather Service has issued a warning to seven states in the southwest saying high heat, low humidity and strong winds are posing an extreme fire risk. Firefighters are already battling dozens of wildfires burning in Arizona, New Mexico and Texas.

And Texas Congressman Ron Paul has won the latest Republican presidential straw poll in New Orleans while an absent Jon Huntsman placed a surprising second. The poll was taken at a Republican leadership conference yesterday where Texas Governor Rick Perry delivered a well-received speech to fuel speculation he's gearing up for a presidential run.

Those are today's top stories. Please don't forget to send us a video of your American dream for our "Making it in America" airing July 3rd. Post your video to our Facebook page or e-mail us your video link at SOTU@cnn.com with the subject line American Dream. The deadline for submission is June 28th.

Thank you so much for watching State of the Union. Happy Father's Day to all of the dads out there. I'm Candy Crowley. Fareed Zakaria GPS is next.